Public Expenditure and Economic Growth: Empirical Evidence for the EU

The relationship between government size and economic growth is a major task in the economic literature and this paper is devoted to public expenditure. We empirically study the relationship between public expenditure and economic growth in the European Union. Our approach consists on a quantile regression for the period 2004-2019. The results show a negative and significant impact of total public expenditure on economic growth, with a higher effect in the high tail of the growth distribution. In a more detailed analysis, the study of three large public expenditures, considering the percentage of total public expense, reveals an insignificant effect of health, and a negative impact of education and social protection, higher in the low tail of the growth distribution. Our findings allow better understanding of the effects of public policies on development beyond linear approaches.